Regardless of any measures introduced to simplify the process, there is still a real issue with confusing pricing and tariffs from energy suppliers. Although simplifying tariffs has been a goal of Ofgem for some time, the pricing of energy to retail customers still leaves many bewildered. Even for the mathematical savvy like His Lordship, understanding the pricing of energy and the associated bills can be difficult but why is this?
The problem lies in the way energy companies price energy and the way they bill for it. For example, electricity is priced in unit per KWh and energy company tariffs will display what they charge per kWh. However not everyone understands what a kWh is and how it relates to their consumption. Electricity is measured in watts or kw but in order to calculate consumption you need to measure this over a time period and the easiest time period for this is 1 hour. Every electrical item in your home will have a wattage rating, normally printed on a label or plate somewhere on the item. It can get more complicated with items, which have different watt ratings depending on whether they are on standby or active use but If your microwave is rated at 1000watts then if you left it running for 1 hour, the consumption would be 1 kWh. So if you were to go round and look at every electrical item and add all the wattages up and the time they were on for you could calculate how many kWh your home uses. Thankfully there is no need to do that as our main electricity meter does this for us by measuring the total consumption of our homes.
Some meters are older ones with mechanical clockwork dials but more modern ones have numbers on wheels or, more recently, electronic displays showing the amount of electricity used. The meters, in general, display kWh used on these displays. This is the reading you give your supplier in order to calculate your electricity usage and cost. Sounds simple doesn’t it? Well it should be but suppliers complicate the pricing by not just charging for the electricity used but also add a standing charge usually calculated daily. This varies from supplier to supplier and there are often huge variations in the standing charge but what is this?
Well as you will no doubt already be aware, it’s basically the fee levied for the supplier providing you with the energy. Suppliers also adjust the price they charge per kWh and the standing charge in order to make their tariffs look cheaper than they really are. Often they will raise their standing charge and reduce their unit charge making the electricity look cheaper on paper but once the standing charge is added the picture changes! This also makes direct comparisons very difficult as you can’t just compare actual unit cost but you also need to factor in the standing charge. However this is usually charged per day whereas unit charge is per hour or more accurately, per kw per hour. So you can calculate your monthly or annual usage in kWh by looking at actual consumption but you then have to multiply the standing charge by the number of days you’re comparing over. Aaaaggghh!
All in all it’s a difficult comparison to undertake and often leads people to give up before they start. Thankfully there are many comparison websites who will do the calculation for you provided you supply accurate details. However these are not without problems. The comparison sites will need your current supplier and your current tariff. This leads to problems when you can’t find your tariff on their list. With the multiple changes in pricing recently these comparison sites have struggled to keep up with the ever-changing tariffs from every supplier. If you choose the wrong tariff the comparison will be in error and could lead to an incorrect decision to switch. Double aaaggghh!
Taking all the above into account it is clear that the energy companies have a very long way to go before their pricing structures and billing is clear unambiguous and easy to understand for their customers. A simpler pricing structure needs to be mandated by Ofgem so every supplier must calculate energy costs in the same way and bills need to be standardised across all suppliers in order to make direct comparisons easier and more accurate. Until then, it seems that confusion is set to continue- and at the expense of the consumer alone! Triple aaagghh!
Are you thinking of switching energy supplier? If not, why not? Have you already switched? How easy was it to compare prices? Please let me know in the comments.
If you’re still keen to save energy but don’t want to switch suppliers, then take a look at this fabulous post from Marie Ellis at Broke Girl in the City which has lots of other top energy saving tips from UK Money Bloggers!
Lady Janey x